In Italy way back in 1906, an engineer, sociologist, economist, political scientist, and philosopher named Vilfredo Pareto made an interesting discovery. He realized that 80 percent of the land in Italy was owned by just 20 percent of its population, and that 20 percent of the peapods produced in his garden produced 80 percent of all the peas. Management consultant Joseph M. Juran widened this to state that, universally, 80 percent of all effects are derived from a mere 20 percent of all causes. Juran named his principle after Pareto, and the ‘Pareto Principle’ is now used and taught in business, sales, marketing, real estate, finance, and virtually every other industry and discipline you can think of, in some way, shape, or form.
How the 80/20 Rule is Supposed to Work
For the marketing professional, the 80/20 rule means a number of things can be predicted with uncanny accuracy:
• 20 percent of your customers will produce 80 percent of your sales
• 20 percent of your products will account for 80 percent of your revenue
• 20 percent of your content will generate 80 percent of your leads
• 20 percent of your landing pages will generate 80 percent of your conversions
• 20 percent of your emails will produce 80 percent of your responses
… and on and on.
How the 80/20 Rule Actually Works
Though often questioned, and not always 100 percent accurate, the 80/20 rule is an excellent way to earmark your resources. No, it might not work out exactly right on paper every time. Perhaps 20 percent of your customers generate 50 percent of your revenue, or if you’re operating in a very small market with a highly valuable product, it might work out to 90 or 95 percent of your profits from 20 percent of your customers.
The important thing to remember, is that the 20 percent is always the most valuable. Eighty percent of your efforts and resources should go to that most valuable 20 percent. For example, develop 80 percent of your content to that top 20 percent of your customer base. Offer 80 percent of your best customer rewards to that group. Make sure you pamper them, because they are truly the backbone of your efforts and the products of those efforts.
Of course, to identify the 20 percent you most need to reach out to, you have to have the right data at your disposal. ReachForce helps marketers increase revenue contribution by solving some of their toughest data management problems. We understand the challenges of results-driven marketers and provide solutions to make initiatives like marketing automation, personalization and predictive marketing better. Whether you have an acute pain to solve today or prefer to grow your capabilities over time, ReachForce can unify, clean and enrich prospect and customer lifecycle data in your business, and do it at your own pace.
To learn more about how ReachForce can help you optimize demand generation and your impact on revenue, get a demo. Get the power to let data drive marketing and higher performance.